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Strategic Management Concepts & Cases
Fred R. David13th edition, USA: Pearson Prentice Hall
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Copyright © 2011 Pearson Education Ch 1 -2
Chapter 1 The Nature of Strategic Management
Strategic Management: Concepts & Cases
13th EditionGlobal Edition
Fred David
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Copyright © 2011 Pearson Education Ch 1 -3
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management –Defined
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Copyright © 2011 Pearson Education Ch 1 -4
Purpose of Strategic Management
To exploit and create new and different opportunities for tomorrow
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Copyright © 2011 Pearson Education Ch 1 -5
Strategic Management
In essence, the strategic plan is a company’s game plan
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Copyright © 2011 Pearson Education Ch 1 -6
3 Stages of the Strategic Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
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Copyright © 2011 Pearson Education Ch 1 -7
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Copyright © 2011 Pearson Education Ch 1 -8
Issues in Strategy Formulation
Businesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover
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Copyright © 2011 Pearson Education Ch 1 -9
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Copyright © 2011 Pearson Education Ch 1 -10
Strategy Implementation Steps
Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to
organizational performance
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Copyright © 2011 Pearson Education Ch 1 -11
Issues in Strategy Implementation
Action Stage of Strategic Management
Mobilization of employees & managers
Most difficult stage
Interpersonal skills critical
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Copyright © 2011 Pearson Education Ch 1 -12
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Copyright © 2011 Pearson Education Ch 1 -13
Peter Drucker: Think through the overall mission of a business. Ask the key question:
“What is our Business?”
Prime Task of Strategic Management
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Copyright © 2011 Pearson Education Ch 1 -14
The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Integrating Intuition & Analysis
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Copyright © 2011 Pearson Education Ch 1 -15
Intuition is based on: Past experiences Judgment Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making in conditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives
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Copyright © 2011 Pearson Education Ch 1 -16
Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
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Copyright © 2011 Pearson Education Ch 1 -17
Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Adapting to Change
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Copyright © 2011 Pearson Education Ch 1 -18
Key Terms in Strategic Management
Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies
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Copyright © 2011 Pearson Education Ch 1 -19
Anything that a firm does especially well compared to rival firms
Strategic Management is Gaining and Maintaining Competitive Advantage
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Copyright © 2011 Pearson Education Ch 1 -20
1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
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Copyright © 2011 Pearson Education Ch 1 -21
Strategists
Gather Information
Analyze Information
Organize Information
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Copyright © 2011 Pearson Education Ch 1 -22
Vision Statement –What do we want to become?
Mission Statement –What is our business?
Vision and Mission Statements
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Copyright © 2011 Pearson Education Ch 1 -23
External Opportunities and Threats
Analysis of Trends Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors
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Copyright © 2011 Pearson Education Ch 1 -24
Basic Tenet/Principle of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of External Opportunities
Avoid/minimize impact ofExternal Threats
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Copyright © 2011 Pearson Education Ch 1 -25
Controllable activities performed especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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Copyright © 2011 Pearson Education Ch 1 -26
Typically located in functional areas of the firm
Management Marketing Finance/Accounting Production/Operations Research & Development Management Information Systems
Internal Strengths and Weaknesses
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Copyright © 2011 Pearson Education Ch 1 -27
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal FactorsPerformance Measures
Ratios
Industry Averages
Survey Data
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Copyright © 2011 Pearson Education Ch 1 -28
Specific results that an organization seeks to achieve in pursuing its basic mission
Long-term means more than one year
Long-Term Objectives
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Copyright © 2011 Pearson Education Ch 1 -29
Long-Term Objectives
Essential for ensuring the firm’s success Provide direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for planning, organizing,
motivating, and controlling
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Copyright © 2011 Pearson Education Ch 1 -30
Means by which long-term objectives are achieved
Strategies
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Copyright © 2011 Pearson Education Ch 1 -31
Strategies Examples
Geographic expansion Diversification Acquisition Product development Market penetration Retrenchment Divestiture Liquidation Joint venture
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Copyright © 2011 Pearson Education Ch 1 -32
Sample Strategies Table 1-1
Best Buy
Levi Strauss
New York Times Company
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Copyright © 2011 Pearson Education Ch 1 -33
Short-term milestones that firms must achieve to reach long-term objectives
Annual Objectives
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Copyright © 2011 Pearson Education Ch 1 -34
Means by which annual objectives will be achieved
Policies
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Copyright © 2011 Pearson Education Ch 1 -35
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Copyright © 2011 Pearson Education Ch 1 -36
Strategic Management ProcessDynamic & continuousMore formal in larger
organizations
Strategic Management Model
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Copyright © 2011 Pearson Education Ch 1 -37
Strategic Management
Communication is a key to successful strategic management
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Copyright © 2011 Pearson Education Ch 1 -38
Benefits of Strategic Management
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Copyright © 2011 Pearson Education Ch 1 -39
Benefits of Strategic Management
Nonfinancial Benefits Enhanced awareness of threats Improved understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Clearer understanding of performance-reward
relationship Enhanced problem-prevention capabilities
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Copyright © 2011 Pearson Education Ch 1 -40
Why Some Firms Do No Strategic Planning Lack of knowledge of strategic planning Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success
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Copyright © 2011 Pearson Education Ch 1 -41
Why Some Firms Do No Strategic Planning (continued) Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion
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Copyright © 2011 Pearson Education Ch 1 -42
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
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Copyright © 2011 Pearson Education Ch 1 -43
Effective Strategic Planning is:
A people process more than a paper process A learning process Words supported by numbers Simple and nonroutine Varying assignments, team membership,
meeting formats, and planning calendars Challenging assumptions underlying
corporate strategy
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Copyright © 2011 Pearson Education Ch 1 -44
Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of
inquiry Is not a bureaucratic mechanism Is not ritualistic or stilted Is not too formal, predictable, or rigid Does not contain jargon or arcane language
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Copyright © 2011 Pearson Education Ch 1 -45
Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is
good business” policy
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Copyright © 2011 Pearson Education Ch 1 -46
Comparing Business and Military Strategy Strategic planning started in the military Similarity
Both business and military organizations must adapt to change and constantly improve
Difference Business strategy assumes competition Military strategy assumes conflict
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Copyright © 2011 Pearson Education Ch 1 -47
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